Vilsack highlighted five critical pivot points for improvements in U.S. dairy exports in 2019 and beyond, with each having a potential positive impact on U.S. dairy farmer milk prices. They include ratification of the U.S.-Mexico-Canada trade agreement (USMCA), trade agreements with China and Japan, and declines in stockpiles of U.S. dairy products and European Union (EU) milk powder inventories.
While exports as a percentage of production have increased in recent years, Vilsack admitted that growth had not translated into stronger milk prices for dairy producers. “It’s been a tough couple of years for dairy farmers,” he said. “We’re dedicated to trying to ease that by expanding access to exports.”
In addition to opening or reopening markets in Canada and Mexico, the USMCA will provide additional protections against geographical indicators (GIs) being imposed by the European Union in some bilateral trade agreements.
Negotiated last fall, Vilsack said the USMCA will not likely be ratified by Mexico and Canada until U.S. import tariffs on steel and aluminum have been lifted, a possibility in 2019. He hopes the U.S. ratification process will be completed by late summer or early fall. Ratification in the U.S. will be made even more difficult as the timeline moves closer to the 2020 general election, when trade agreements become a political football.
“In the U.S., agriculture will have to be very, very engaged in lobbying for passage of USMCA,” Vilsack said. “It’s not clear today the votes exist for passage of this trade agreement. There are folks both on the left and the right who have expressed concerns.”
USDEC and National Milk Producers Federation (NMPF) officials have begun to emphasize the importance of dairy-related jobs and the economic impact in congressional districts and states as they lobby for passage.
“For a long time, we’ve made the mistake of only discussing agriculture in the context of farms, producers and ranchers,” Vilsack said. “We need to expand that by talking about the food and agricultural industry. As a single industry, 43 million people are directly and indirectly connected and employed in that industry. That’s 28 percent of the entire workforce of the U.S. If we can begin to educate policymakers about the significant economic importance of this industry, it might create easier times for getting trade agreements approved.”
Bilateral trade agreements
Completing U.S. trade agreements with China and Japan are critical, offering different opportunities but facing different challenges, Vilsack said. Specifically, if the U.S. can gain a level playing field on dairy trade with Japan, U.S. dairy market share could double, with the value of that market tripling.
Under the U.S. process, the timeline for completion of bilateral agreements is long and complicated by political changes – further complicated by the recent government shutdown. He said the EU has had a longer history of being far more aggressive in seeking bilateral trade agreements and moving quicker.
“More, New, Better” is the mantra as USDEC works toward the goal of exporting 20 percent total solids production, Vilsack said. “We want to do more, we want to do things that are new and we want to do things we’ve done in the past, better,” he said.
As examples, Vilsack highlighted conducting dairy ingredient innovation seminars in Mexico to highlight functionality and versatility of powders and whey proteins; working to develop cheese channels in China, Hong Kong and Taiwan; restaurant and home cheese promotions in South Korea; creation of a “center of excellence” in Southeast Asia to showcase USDEC member companies; and expanded pizza cheese promotions in Japan. One overriding component is creating awareness of a U.S. dairy marketing and packaging icon or “seal” to help foreign customers easily identify U.S.-sourced dairy products.
Vilsack highlighted ongoing efforts, specifically targeting potential dairy consumers in Southeast Asia and China. Efforts include helping identify dairy ingredient and product innovations to meet the tastes and demands of specific markets, and development of relationships to move U.S. dairy products into those marketing chains. He said Southeast Asia was a gateway to a middle class population growing exponentially.
“We’re sending a message that we intend to be in this market for good and be very competitive in it,” Vilsack said.
Vilsack said U.S. dairy had “an incredibly strong” position compared to competitors on the issue of sustainability. He said a “zero emission dairy” operation would create an enormous opportunity for dairy producers and the dairy industry at home and abroad. In some cases, current regulatory processes delay implementation of technologies that would move dairy in that direction.
- Progressive Dairyman
- Email Dave Natzke